Estonian taxation system is considered to be simple and liberal. Compared to most European countries, the major difference is that income tax has only one general flat rate.
Direct taxes are withheld from the salary automatically by the employer. Direct taxes are income tax, unemployment insurance and the funded pension payment.
As of January 2015, income tax is 2o%, and there is a monthly unemployment insurance tax of 1,6%, which is deducted from your salary by your employer.
A funded pension payment is withheld from your salary at a rate of 2%, if you have joined the optional funded pension system. You can read more about it in the Jobs -> Pensions section.
As of January 2016, the sum of 170 euros from the monthly salary is income tax free for Estonian residents. You must ask your employer to take the income tax free sum into account monthly for salary payments. Income tax is not charged on compensation for official travel, accommodation and daily allowances, if these are within the limits established by the law.
Social tax is paid by employers at a rate of 33% on all payments made to employees for salaried work performed, as well as an extra 0,8% unemployment insurance. Social tax is not part of the salary number; it is calculated on the basis of the agreed (gross) salary. 13% of the social tax goes to the Health Insurance Fund and 20% goes to pension insurance.
Estonia has agreements to avoid double taxation with many countries, incl. all EU member states. Some of these agreements have more favorable conditions for researchers or professors so check the agreement with your home country.
There is also a land tax for landowners. The land tax varies in different towns and counties and must be paid by the landowner according to the tax announcement that he/she receives from the Estonian Tax and Customs Board.
The most important of the indirect taxes is the value-added tax (VAT), which is 20% (from 1 July 2009) for most goods. The VAT for some goods, such as books, medicines etc., is 9%. There are also more indirect taxes for gambling, tobacco products and alcohol.
- Estonian taxes and tax system (presentation by the Ministry of Finance)
- Estonian Tax and Customs Board. Information for private client
- Estonian Tax and Customs Board. Income Tax
- Estonian Ministry of Finance. Agreements to avoid double taxation
- Estonian Tax and Customs Board. Refund of the overpaid income tax in Estonia
- Estonian Tax and Customs Board. Foreigners coming to work to Estonia – taxation checklist (PDF)
- Income Tax Act
- Salary/Wage and Tax Calculator (unofficial website)